W2 or 1099, Which is Right for you?

W2 or 1099, Which is Right for you?2017-12-142018-03-09/wp-content/uploads/2018/01/axiom-final-logo-1.pngAXIOM Learning Solutionshttps://axiomlearningsolutions.com/wp-content/uploads/2018/03/w2.jpg200px200px

There are two ways contractors participate in the learning and development workforce: either as W2 consultants or as independent contractors who have self-incorporated. For the consultant, there are benefits to each. Note, 1099 is not a viable option without the proper insurances held by the consultant.

As a W2 consultant or Client Payrolled Employee (CPE), you are an employee of the organization representing you to the “end client.” For example, if you work with AXIOM, you are an employee of AXIOM even though you may work on-site or remotely for XYZ Company. The benefits of being a W2 consultant include:

Your W2 status means AXIOM pays half of the Social Security and Medical taxes on the money you earn at that position

AXIOM takes care of withholding federal and state taxes on your income as well as covers cost of payroll fees and multistate fees if applicable.

You may receive benefits like limited paid time off depending on the state you live and work.

If overtime is approved in writing by AXIOM end client you can earn time and half for hours over 40.

You are responsible for reporting your hours to AXIOM and potentially your manager at AXIOM’s end client. AXIOM handles billing for the hours.

The consultant is paid every two weeks with direct deposit offered.

Contractors who want more independence and autonomy typically choose to self-incorporate. Then you become a Self-Incorporated Contractor. When you self-incorporate, you become the sole employee of your own business, which then contracts services out to other companies (C2C) such as AXIOM. Individuals typically incorporate as an S-Corp or an LLC to reduce liability. AXIOM encourages you to talk with your certified public accountant before deciding to self-incorporate, to determine which corporation type is best for you.

The benefits to being a self-incorporated technical contractor include:

Earning a higher hourly rate—largely because AXIOM is not responsible for taxes, payroll expenses, and benefits

Being your own boss long-term

Added opportunities of business expense write offs and savings (AXIOM encourages you to speak to your CPA about this)

Usually are provided more autonomy to manage your work and often increased opportunities to be fully remote

While the contingent workforce continues to grow, organizations, independent contractors and vendors alike need to be aware of laws governing the hiring of contractors. Keep yourself safe in this growing gig economy by finding a trusted outsourced provider that is educated on IRS requirements and providing a safe and legal working environment for you.